After the successful placement and layering of money from illegal proceeds, criminals need to find a way to integrate it back into the legal economy. This process is called integration. Integration is the final step of the money laundering process, as a result, it is tough to differentiate between illegal and legal wealth at this stage.
However, just like during the placement and layering stage, there are ways to recognise integration activities. We covered all that and more in this article, let's dive right in!
What is Money Laundering?
Money laundering is the process through which criminals masks proceeds from illegal activities to avoid law enforcement and relevant authorities. Basically, there are 3 stages of money laundering, which are - placement, layering and integration.
Placement is the step in which the criminal introduces money from illegal activities into the financial system, in layering, they run it through several legal financial transactions to mask its source. Finally, integration is the stage where the money is reintroduced into the legal economy.
Anti-money laundering laws are structures put in place to detect and curtail money laundering activities. However, more often than not, criminals have come up with complex ways to bypass them, taking advantage of when businesses slack in or neglect their duties. As a business, it is important that you understand these methods and set up effective countermeasures based on your customer risk profile and jurisdiction.
What is Integration in Money Laundering?
Integration is the final stage of a money laundering process where the money is reintroduced to the legal economy. In integration, the money is re-introduced into the legal economy after a series of reconditioning. This is done to give the money a legitimate appearance.
During integration, the money is used to make high-value purchases like luxury goods, real estate, and residential or commercial property. The activity is done very carefully with proven legitimate sources to create a valid explanation for where the money came from. Therefore, it is hard to distinguish legal from illegal at this stage and the criminal can use the money without getting caught.
To effectively counter integration, businesses need to have documentation from the previous stages as evidence. However, most times, there is usually an overlap between the three stages of money laundering that can be tracked.
How is the integration stage in Money Laundering Achieved?
Integration is usually achieved through the following:
- Investing in high-end cars, jewellery, property market, artwork and other highly-priced commodities
- Overvaluation of the value of imported goods from a country, with false invoices to back it up
These activities are done in the hope that the money launderer can enjoy their wealth without it being traced to illegal activities.
How to Detect Integration in Money Laundering
Detecting integration in Money Laundering is very difficult because it is the final stage where the process is almost complete. As earlier said, you would need to have been tracking the launders from the first two stages and gathered document proofs as evidence.
Ongoing transaction monitoring and sanction screening is the best way to identify launders at this stage. However, to be effective, you’d need to have established a robust AML system that complies with the level of risks of conducting business. An effective enhanced due diligence also goes a long way in identifying and preventing money laundering early on.